Writing this on a phone ...
We have civil liberties and due process.
Guy in your example could claim he's not the biological father and just acting as a good guy. Or his mom will testify he's living with her. (Hence my generational point). I can't sit out there for days on end, neighbors aren't always reliable due to their own character issues . I cannot shove a q-tip in his mouth and do a DNA test to prove he's lying. (If they aren't married and no proof he's dad, then they are not breaking any rules. He's more or less a roommate) . Hence my statement about ease of access.
Fact is benefits do add to the economy even if it is unseemly to many. Hell I joke that pot dealers are a boon for the economy! PS3's, Bose stereos, tricked out toys and delivered food for as far as the eye can see! (Generating sales and income taxes that wouldn't have been there.)
The rules are clear and we have to follow them. As far as "seeing it" if the person/store are not reported to the respective state's auditor or fraud hot line nobody can do anything. You have no idea the numbers of calls I MUST follow up on from some upset person (someones ex, nosey neighbor, etc.) That reports so and so is ripping the system off and in reality they aren't even on benefits or are reporting everything the complaint said and still eligible. THAT clogs things up. If the identity of "some guy/girl " isn't known we cannot initiate an investigation.
People do get removed 1 year for first, 3 years second , lifetime for third, 10 years for duplicate. What isn't considered is that it's just that one person being banned, if the household has children, etc. They will still (most of the time) be eligible. So the household just gets less. THIS IS GOOD because say that banned person owes us $1000. There's little chance we'll effectively recoup that with payments (blood from a stone), BUT we can take 10% of the benefits they are eligible for and use that to pay off the $1000.
(I can only see / remember so much of your post so please pardon me if I didn't address everything.
Political issue : if you live in a poor district you (politicians) want to cover your base so you use the fact that x% is on benefits and you need more economic stimulus in your area. If you are in an affluent area you can ensure your caring image by supporting those in need and ensure babies get fed. You can also do the cut entitlements argument in areas that have a large population on benefits (appeal to the frustrated) . Theeeeeeen you get elected andpm me anytime! all the promises get cut or bogged down BUT you can keep using the preferred position next time!